Sued for General [Investment] Advice?

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SkippyMcgee
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Sued for General [Investment] Advice?

Post by SkippyMcgee » Fri Oct 28, 2016 8:38 am

This might be a stupid question, so please bear with me :P

Can you get sued for giving general investment advice?

And how do a lot of you in the boglehead community tread this fine line?

I'm sure a lot of people on this forum are fairly well-regarded by their peers, family members, community. People might come to you for advice. And I bet a lot of us genuinely enjoy giving advice and helping others. But we live in a litigious society.

And while we're at it, a follow-up question, are there any bogleheads out there who do financial advising on the side? Fee-only, no commissions, because you enjoy helping people and you do it part time? Care to share your experience?

tub

orca91
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Re: Sued for General Advice?

Post by orca91 » Fri Oct 28, 2016 8:42 am

When you give advice, be sure to include "you can and will lose money from time to time" and you're covered. :happy

It would be pretty tough for anyone to sue about general advice given around the water cooler.

seanmerron
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Re: Sued for General Advice?

Post by seanmerron » Fri Oct 28, 2016 8:51 am

I think the general rule is you can recommend but cannot actually make investments for others without a license. CFA/CFP's can confirm.

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Re: Sued for General Advice?

Post by KyleAAA » Fri Oct 28, 2016 9:04 am

I'd love to hear a lawyer chime in because I may have a misunderstanding. My belief is that if you are asked for advice and give your opinion without charging for it, you're probably safe. If you claim to have a credential you don't or accept money in exchange for advice, you're in murky water.

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Smorgasbord
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Re: Sued for General Advice?

Post by Smorgasbord » Fri Oct 28, 2016 9:05 am

orca91 wrote:It would be pretty tough for anyone to sue about general advice given around the water cooler.
I would change that to:
It would be pretty tough for anyone to successfully sue about general advice given around the water cooler.
Unfortunately, even when you win against a frivolous case you have usually lost in terms of time and money.

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Re: Sued for General Advice?

Post by jebmke » Fri Oct 28, 2016 9:19 am

TubofProtein wrote:Can you get sued for giving general investment advice?
I don't give advice period, not to anyone including family. Very few people even ask.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Sued for General Advice?

Post by randomguy » Fri Oct 28, 2016 9:33 am

TubofProtein wrote:This might be a stupid question, so please bear with me :P

Can you get sued for giving general investment advice?

And how do a lot of you in the boglehead community tread this fine line?

I'm sure a lot of people on this forum are fairly well-regarded by their peers, family members, community. People might come to you for advice. And I bet a lot of us genuinely enjoy giving advice and helping others. But we live in a litigious society.

And while we're at it, a follow-up question, are there any bogleheads out there who do financial advising on the side? Fee-only, no commissions, because you enjoy helping people and you do it part time? Care to share your experience?

tub
You can get sued for anything. If they have a case is a different one.

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Re: Sued for General Advice?

Post by adamthesmythe » Fri Oct 28, 2016 9:48 am

> You can get sued for anything.

In the US you can be sued for having a wide tie.

Personally I feel less of an urge to improve other people as I get older. So I rarely feel the need to give advice.

On financial matters- if I were asked- I would probably talk about what I have done personally, in general terms, without advising anyone else to do the same thing.

This is probably almost as safe as staying in the house and not answering the phone.

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SkippyMcgee
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Re: Sued for General Advice?

Post by SkippyMcgee » Fri Oct 28, 2016 9:52 am

randomguy wrote:
You can get sued for anything. If they have a case is a different one.
Smorgasbord wrote:Unfortunately, even when you win against a frivolous case you have usually lost in terms of time and money.
adamthesmythe wrote:> You can get sued for anything.

In the US you can be sued for having a wide tie.
I think this is kinda how I've always viewed it. But a part of me wants to do it anyways because it genuinely brings me joy. It's rewarding seeing other people take better control of their lives. Granted, I haven't done this a whole lot, but the few good interactions I've had have resulted in positive changes for the individual.

tub

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Re: Sued for General Advice?

Post by DVMResident » Fri Oct 28, 2016 9:57 am

If you're giving advice to friends and family, chances are pretty low that you'll get sued.

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Re: Sued for General Advice?

Post by NOVACPA » Fri Oct 28, 2016 10:02 am

As a CPA, people always ask for advice ranging from my expertise (tax) to investments to insurance. The latter I am not qualified to give advice on and investments I can only opine on the tax aspect.

That being said, I usually give my advice with the caveat that the advice is the same I'd give at a cocktail party and should be taken as such.

Usually, I'm showing the weak points of their idea. I am rarely a positive echo chamber they are looking for. Once or twice they get the general lean of my advice.

If they sue me, well... I guess they aren't getting invited to the Christmas party.

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Tyler9000
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Re: Sued for General Advice?

Post by Tyler9000 » Fri Oct 28, 2016 10:28 am

There are lots of ways to help people. My personal rule of thumb is to freely share facts, ideas, and personal experiences but to steer clear of direct advice.
Last edited by Tyler9000 on Fri Oct 28, 2016 10:33 am, edited 2 times in total.

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Re: Sued for General Advice?

Post by Rainmaker41 » Fri Oct 28, 2016 10:31 am

On the few occasions when I have been in that position, I stick to giving a brief idea of what I do to the extent it is relevant to their situation. Then I email a link to the 'getting started' wiki page at Bogleheads.org, saying that I don't know everything, but hopefully they will find the suggestions here to be helpful.

Giving someone financial guides to read is preferable to telling them what to do, which is in turn preferable to doing things for them.

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Re: Sued for General Advice?

Post by pondering » Fri Oct 28, 2016 10:35 am

To me the more relevant question is what is the rate of lawsuits. and what were the consequences.
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Re: Sued for General Advice?

Post by Sidney » Fri Oct 28, 2016 10:44 am

DVMResident wrote:If you're giving advice to friends and family, chances are pretty low that you'll get sued.
More likely to lose a friend or estrange a family member.
I always wanted to be a procrastinator.

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Re: Sued for General Advice?

Post by jimb_fromATL » Fri Oct 28, 2016 10:45 am

TubofProtein wrote:
Can you get sued for giving general investment advice?

And how do a lot of you in the boglehead community tread this fine line?
That's one of the reasons why this site and virtually all others have statements in the Terms Of Service and more prominent places that say stuff like:
  • "...No guarantees are made as to the accuracy of the information on this site or the appropriateness of any advice to your particular situation..."


jimb

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Re: Sued for General Advice?

Post by hicabob » Fri Oct 28, 2016 11:13 am

Rather than giving specific investment advice I like to mention low-cost indexing as a method and then to give a person a pointer to bogleheads instead. It would be hard to imagine a successful lawsuit stemming from a well meaning but badly performing hot stock tip though that could certainly disrupt relationships.

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Re: Sued for General Advice?

Post by jhfenton » Fri Oct 28, 2016 11:51 am

adamthesmythe wrote:On financial matters- if I were asked- I would probably talk about what I have done personally, in general terms, without advising anyone else to do the same thing.

This is probably almost as safe as staying in the house and not answering the phone.
This is the way I approach it. I have family, friends, and coworkers ask me about benefits and investments all the time. I will explain what I do, and how I approach things. I will explain how a 401(k) match works. I will explain how target retirement mutual funds work and how they're intended to be used. I will explain how an HSA and HDHP work together. I will explain the different between an HSA and an FSA.

I will not tell or suggest to someone that they should invest in XYZ fund or that they should choose the HSA/HDHP or the PPO. I am an attorney (corporate, in-house) and the last thing I want to do is be giving "advice" to coworkers. That is not my job. I will point folks to Fidelity, our 401(k) custodian, who offers free 401(k) advice if they want specific recommendations.

I am a little more open with close family members. For example, I've suggested to an in-law that he stick with the index-based target retirement funds in his 401(k), because that's unlikely to get him into trouble. And I've given my mother-in-law advice on old insurance policies, etc. But those are low-risk relationships.

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Re: Sued for General Advice?

Post by SkippyMcgee » Fri Oct 28, 2016 12:26 pm

jhfenton wrote:
adamthesmythe wrote:On financial matters- if I were asked- I would probably talk about what I have done personally, in general terms, without advising anyone else to do the same thing.

This is probably almost as safe as staying in the house and not answering the phone.
This is the way I approach it. I have family, friends, and coworkers ask me about benefits and investments all the time. I will explain what I do, and how I approach things. I will explain how a 401(k) match works. I will explain how target retirement mutual funds work and how they're intended to be used. I will explain how an HSA and HDHP work together. I will explain the different between an HSA and an FSA.

I will not tell or suggest to someone that they should invest in XYZ fund or that they should choose the HSA/HDHP or the PPO. I am an attorney (corporate, in-house) and the last thing I want to do is be giving "advice" to coworkers. That is not my job. I will point folks to Fidelity, our 401(k) custodian, who offers free 401(k) advice if they want specific recommendations.

I am a little more open with close family members. For example, I've suggested to an in-law that he stick with the index-based target retirement funds in his 401(k), because that's unlikely to get him into trouble. And I've given my mother-in-law advice on old insurance policies, etc. But those are low-risk relationships.
Thanks, this makes sense to me. "What has worked for me" and how something works, rather than giving direct advice as to their circumstances.

tub

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Re: Sued for General Advice?

Post by Bylo Selhi » Fri Oct 28, 2016 12:47 pm

jimb_fromATL wrote:That's one of the reasons why this site and virtually all others have statements in the Terms Of Service and more prominent places that say stuff like:
  • "...No guarantees are made as to the accuracy of the information on this site or the appropriateness of any advice to your particular situation..."


jimb
That protects this site from liability. I don't see how it protects individual posters here. While many people here post anonymously, I suspect that there are legal and technical ways to pierce that veil.
TubofProtein wrote: Thanks, this makes sense to me. "What has worked for me" and how something works, rather than giving direct advice as to their circumstances.

tub
I use similarly vague verbiage e.g., "Consider [some investing strategy, some type of asset, etc.]"

Also I tell people that my free investment advice comes with a double-your-money-back guarantee.

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Re: Sued for General Advice?

Post by jdb » Fri Oct 28, 2016 1:00 pm

Good question. I have a few UHNW friends who have been impressed with my investment savvy following Jack Bogle. They all have investment advisors. And they are not working at a job. When they ask my advice I tell them that I refuse to give investment advice since am not a registered advisor, just say that I use low cost index funds at Vanguard. I know darn well that they are not going to ditch their advisors and what I say will be repeated to their advisors. OTOH with my many friends who are my favorite people, us working stiffs, I recommend ditching any advisors or brokers and using the Vanguard platform with index funds allocated between equity and FI. They have been thankful and I suspect that I have been of assistance. I also mention this site but to my surprise very few people take the time to go on the internet for investment ideas that don't involve individual stock touts. But in response to your question, see no liability issues unless you actually handle direct investments for friends. And this legal advice is worth every penny that you paid for it.

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Re: Sued for General Advice?

Post by Durzo » Fri Oct 28, 2016 1:12 pm

Are there any historical precedents of this happening? Say I post this message on Facebook/Youtube/Twitter/text it/personally say it to someone:

"You need to buy X stock/commodity/fund. It has nothing but upside from now on. You are guaranteed to make a huge profit within the next couple of weeks. Best of all it's really stable so you won't lose money and it will consistently give great returns for the next 20 years."

As a Boglehead I would never do that, but what civil case could be brought against me?

It's like those videos telling people to microwave their phones to make them waterproof or drill a hole in the new Iphone for a headphone jack. It's mean and cruel, but is it illegal?

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Re: Sued for General Advice?

Post by PVW » Fri Oct 28, 2016 1:27 pm

Bylo Selhi wrote:
jimb_fromATL wrote:That's one of the reasons why this site and virtually all others have statements in the Terms Of Service and more prominent places that say stuff like:
  • "...No guarantees are made as to the accuracy of the information on this site or the appropriateness of any advice to your particular situation..."


jimb
That protects this site from liability. I don't see how it protects individual posters here. While many people here post anonymously, I suspect that there are legal and technical ways to pierce that veil.
If people are going to start suing for bad advice they got from an anonymous poster on the internet, we are going to need a lot more lawyers.

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Re: Sued for General Advice?

Post by MN Finance » Fri Oct 28, 2016 1:28 pm

Giving investment advice requires licensing. If you are unlicensed and give advice you are practicing without a license, though the state or feds are unlikely to care that a layperson gives advice. They would be more concerned with an unlicensed professional giving advice (ex, an insurance agent giving securities advice or a stock broker giving insurance advice.)

A licensed professional could be taken to arbitration for giving bad advice but that bar is significantly high enough that it would be painfully obvious to the posters here it was bad (and 'more bad' than the sins most here think are bad but aren't technicqlly.)

Giving general advice to a wide audience, even to the point of recommending specific investments is not considered giving advice in this context.

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Re: Sued for General Advice?

Post by adamthesmythe » Fri Oct 28, 2016 5:39 pm

> If people are going to start suing for bad advice they got from an anonymous poster on the internet, we are going to need a lot more lawyers.

Think about the other side of this. The evidence is that we have a good bit more lawyers than we really need. So some are going to be hungry and will take marginal cases on the chance of a payoff.

But I agree with you. Advice given on anonymously on the internet is very safe. I do believe one should be circumspect about giving advice to friends and relatives.

From time to time we get postings like "how do I convince X of Y." THESE are the people who are running a finite, though very small, risk.

By the way, nothing that I said is LEGAL advice.

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Re: Sued for General Advice?

Post by boglephreak » Fri Oct 28, 2016 5:49 pm

as a lawyer, im wondering if i can get sued for giving advice on whether someone can get sued for giving advice.

absent a duty (e.g., a fiduciary relationship with the individual), a pecuniary interest in the subject of the advice or misrepresenting yourself as something you are not, i doubt you can be successfully sued for providing general advice. i say doubt because i have never researched or litigated the issue. i also say doubt so that people on the internet dont rely on my advice and sue me.

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Re: Sued for General Advice?

Post by avalpert » Fri Oct 28, 2016 5:59 pm

boglephreak wrote:as a lawyer, im wondering if i can get sued for giving advice on whether someone can get sued for giving advice.

absent a duty (e.g., a fiduciary relationship with the individual), a pecuniary interest in the subject of the advice or misrepresenting yourself as something you are not, i doubt you can be successfully sued for providing general advice. i say doubt because i have never researched or litigated the issue. i also say doubt so that people on the internet dont rely on my advice and sue me.
I'm considering suing you for advising me not to sue you for providing advice on whether you can be sued for advising me on the internet

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Re: Sued for General Advice?

Post by LarryAllen » Fri Oct 28, 2016 6:12 pm

A sad statement on life that this is an issue and yet it is very much an issue. Sad.

As others have said I think it would be tough to "lose" a case for giving general advice to a friend since you owe no duty to that person. On the other hand, we live in such a crazy litigious world that it wouldn't shock me to see such a lawsuit come down the pipe. Sad, sad, sad.

As a lawyer anytime I give advice outside my area of expertise I always caveat it the statement by saying you really should talk to an investment advisor (or whatever professional it is) as this is just my personal opinion, blah, blah, blah.

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Re: Sued for General Advice?

Post by amateurnovice » Fri Oct 28, 2016 6:32 pm

You know how when there is a lull in traffic and someone is trying to pull out in front of you and you motion to them that it's all clear and then a car pulls out of nowhere and slams into them and you get sued, it's the same principle. Honestly, unless you're making trades on their account or charging them a fee for you advice, it'd be difficult for anyone to sue you if they lost money. They could sue, but would they win? Unlikely.

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Re: Sued for General Advice?

Post by MN Finance » Fri Oct 28, 2016 6:43 pm

amateurnovice wrote:You know how when there is a lull in traffic and someone is trying to pull out in front of you and you motion to them that it's all clear and then a car pulls out of nowhere and slams into them and you get sued, it's the same principle. Honestly, unless you're making trades on their account or charging them a fee for you advice, it'd be difficult for anyone to sue you if they lost money. They could sue, but would they win? Unlikely.
Just to clarify because it's come up a couple times. Giving advice is NOT dependent on receiving compensation nor placing trades, so that's not the measuring stick. Giving advice on specific securities is advice, executed or paid or not. And further, the action of a suit would probably only be possible if you are actually holding yourself out as an advisor giving advice (and unlicensed). And lastly, financial advice is NOT the same as investment advice.

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Re: Sued for General Advice?

Post by arcticpineapplecorp. » Fri Oct 28, 2016 6:56 pm

Just make sure the advice you give meets the "suitability" standard unless you're giving advice about a retirement account. That's how insurance salesmen get to put people in lousy high cost (commission) products. They just have to be suitable. If you're dealing with retirement account advice, then make sure you're a fiduciary or you run the risk of running afoul of the DoL new rules coming out.

In seriousness, if you're concerned about being sued, why not consider getting an umbrella policy? Policies are in $1 million increments. This says it costs around $380 a year for coverage between $1 and $2 million. YMMV.

https://www.google.com/search?q=how+muc ... rance+cost
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Re: Sued for General Advice?

Post by TomCat96 » Fri Oct 28, 2016 7:05 pm

I really think people are overreacting based on speculation here.

Do any of you know of anyone who has been sued for giving "general advice"? I don't.
My specialty is IP, so this is out of my expertise as well. But I really doubt one can sustain a successful lawsuit based on advice.

For one, what would be the basis for the cause of action? A breach of duty? If I told you all to go buy Tesla stock, and the stock tanks, have I breached the duty of care I owe to you as a guy on the internet? What would that even look like?

What is the duty of care I owe to you as a guy on the internet? What is the standard of the fiduciary duty I owe to you as a guy on the Internet? I have never met any of you. No compensation was exchanged. You just saw my post on a forum one day and bam! duty formed? Is it even possible for me to owe a duty of care to someone when I am unaware of their existence?

What about malpractice? Can I inadequately perform my function as a guy on the internet? Will you sue me for damages to retrieve the amount you paid me which is nothing?

Is there any way that I can be negligent to you?

One can be sued for their words obviously if such words amount to fraud, misrepresentation, malpractice, libel, copyright infringement.

But barring that, it cannot possibly be the case where one can sued for general advice. If any of you disagree with me, this is what I recommend.

1. All of you go buy stock of a public company, say apple.
2. If apple goes up, you win.
3. If apple goes down, do a search on seekingalpha.com and go file a lawsuit against every person who gave advice to buy apple stock.

If the law holds in your favor, you have your pick of the litter of any number of them who may indemnify you for their awful awful advice.

In fact why stop at apple? Do it for all publically traded companies. Why stop at seekingalpha? Do it for every positive google search you find.

I think the speculation behind this thread is just silly. Unless one can point to a more specific and concrete set of facts, the proposition one can be sued for general advice cannot possibly hold water.

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Re: Sued for General Advice?

Post by Index Fan » Fri Oct 28, 2016 7:16 pm

adamthesmythe wrote:> You can get sued for anything.

In the US you can be sued for having a wide tie.

Personally I feel less of an urge to improve other people as I get older. So I rarely feel the need to give advice.

With age comes wisdom :)
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Re: Sued for General Advice?

Post by Bylo Selhi » Fri Oct 28, 2016 8:26 pm

TomCat96 wrote:If the law holds in your favor, you have your pick of the litter of any number of them who may indemnify you for their awful awful advice. In fact why stop at apple? Do it for all publically traded companies. Why stop at seekingalpha? Do it for every positive google search you find.
How often do sites like seekingalpha--or a newspaper for that matter--provide unequivocal advice? Typically they couch their advice in ambiguity e.g., "Apple stock may [might, could, etc.) go up..." Indeed that's just another reason why most of what they publish is pure financial pornography.

After all, if the author of the piece was so certain that Apple would go up why would he share his "knowledge" with the rest of us? (And why is he writing financial porn for a living when he could be using his financial "skill" to make real money buying and selling securities on his own account?)

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Re: Sued for General [Investment] Advice?

Post by LadyGeek » Fri Oct 28, 2016 9:25 pm

This thread is now in the Personal Finance (Not Investing) forum (financial advice).

As noted earlier, the bottom of every forum page (and wiki page) has this disclaimer:
No guarantees are made as to the accuracy of the information on this site or the appropriateness of any advice to your particular situation.
The wiki has a comprehensive disclaimer here: Bogleheads®:General disclaimer

=================

As for providing investment advice "on the side". Charging for your services requires certification. See: Investment Advisers | FINRA.org

Also see: Financial planner and Investment adviser
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Re: Sued for General [Investment] Advice?

Post by LadyGeek » Fri Oct 28, 2016 9:27 pm

Please stay on-topic, which is focused on financial services and investment advice as it relates to your situation.

General rants are off-topic.
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Re: Sued for General Advice?

Post by daveydoo » Sat Oct 29, 2016 12:13 am

MN Finance wrote:Giving investment advice requires licensing. If you are unlicensed and give advice you are practicing without a license, though the state or feds are unlikely to care that a layperson gives advice. They would be more concerned with an unlicensed professional giving advice (ex, an insurance agent giving securities advice or a stock broker giving insurance advice.)
Unfortunately, the only way to have a license is to have a proven conflict of interest.

Kitces reviews the three paths (see: https://www.kitces.com/blog/are-the-lic ... -too-easy/) and all are commercially sponsored:

1. Registered Representative With A Broker-Dealer

2. Insurance Agent With An Insurance Company

3. Investment Adviser Representative (IAR) with a Registered Investment Adviser (RIA)

So there are probably no objective advisors -- at least at the time they obtain their certification. I see no route for one to do this at home -- yet it's a very circumscribed (read: small) knowledge base compared with most professions. It's as if every doctor went to Merck or Aetna Medical College and pretty much trained in those products and recommended them exclusively. Maybe after a few years of dues-paying, they could open their own office and declare themselves objective and fee-only. I don't think that type of medical license would inspire much confidence.
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Re: Sued for General Advice?

Post by carolinaman » Sat Oct 29, 2016 7:39 am

randomguy wrote:
TubofProtein wrote:This might be a stupid question, so please bear with me :P

Can you get sued for giving general investment advice?

And how do a lot of you in the boglehead community tread this fine line?

I'm sure a lot of people on this forum are fairly well-regarded by their peers, family members, community. People might come to you for advice. And I bet a lot of us genuinely enjoy giving advice and helping others. But we live in a litigious society.

And while we're at it, a follow-up question, are there any bogleheads out there who do financial advising on the side? Fee-only, no commissions, because you enjoy helping people and you do it part time? Care to share your experience?

tub
You can get sued for anything. If they have a case is a different one.
You are right Tub. However, it may cost you a lot of money for lawyers to defend you. If you are perceived to have deep pockets, you are a target for litigation.

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Re: Sued for General [Investment] Advice?

Post by j0nnyg1984 » Sat Oct 29, 2016 1:10 pm

You can be sued for anything in this ridiculous country.

I do not hesitate to give investment advice to those who ask me. So far, one friend (who took none of it), my brother, and my parents.

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JDCarpenter
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Re: Sued for General [Investment] Advice?

Post by JDCarpenter » Sat Oct 29, 2016 1:39 pm

Another lawyer here.

I do some securities litigation, including representation in the past of brokerage firms--although today any securities work is within the general ambit of a commercial litigation practice; not a specialist....

Agree that you can be sued for anything and that a plaintiff succeeding in such a suit is another thing entirely.

My personal habit is to give advice freely. I've walked people at my office through 401k options; even assisted some folks with signups in years past when I was a plan fiduciary (which I knew was sticking my neck out a bit, but.....) Just recently spent a couple of hours with a young lady who works in my wife's office going over investment/financial options for she and her husband as they finally are in a position to start investing in their early 30s.

I'm comfortable advising people broadly consistent with the general principles of this forum:
Save money. Don't over extend. Get the match. If a really bad 401k, maybe the match is enough and put the rest in taxable account--here are the tradeoffs. Index. Look to Vanguard; if want brick/mortar, look at Schwab, TD, Fidelity if close by--but be wary of any advice that takes you away from broad indexing.... Here's a book and a nice pdf--and some websites.
That can be a big boost for someone who is just getting started. If I end up getting sued over it, that's a risk I'm willing to bear.

________________
E.T.A.--after reading the next post from Smalltown, I remembered that I also caution about volatility and the need to ride it out (and therefore, appropriate asset allocation)
Last edited by JDCarpenter on Sat Oct 29, 2016 2:00 pm, edited 1 time in total.
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smalltown
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Re: Sued for General [Investment] Advice?

Post by smalltown » Sat Oct 29, 2016 1:53 pm

Regarding financial advice, I'm less concerned about being sued, and more concerned about being resented.

I send friends and colleagues to Bogleheads, usually to particular wiki pages (one-fund, windfall, expense ratios, etc.). But I'm always hoping that bad luck doesn't have them quickly losing money because they followed Bogleheads advice.

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Doom&Gloom
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Re: Sued for General [Investment] Advice?

Post by Doom&Gloom » Sat Oct 29, 2016 2:56 pm

smalltown wrote:Regarding financial advice, I'm less concerned about being sued, and more concerned about being resented.

I send friends and colleagues to Bogleheads, usually to particular wiki pages (one-fund, windfall, expense ratios, etc.). But I'm always hoping that bad luck doesn't have them quickly losing money because they followed Bogleheads advice.
Same here. Fortunately, most of my friends who actually "ask for advice" are really simply starting a conversation to tell me how smart they are at investing. The most recent example was a friend who was about to invest with EJ in a fund that had doubled or tripled the market for the past two or three years. *sigh*

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ofcmetz
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Re: Sued for General [Investment] Advice?

Post by ofcmetz » Sun Oct 30, 2016 4:02 am

I tell people to save as much as they can in index funds. Hope that doesn't get me sued.

I try to be prudent but I don't really worry about lawsuits. Of course in my line of work I've found that in cases where I just know I'll be sued I'm not. Then when I think there is no question that everything was done right a lawsuit turns up.
Never underestimate the power of the force of low cost index funds.

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Re: Sued for General Advice?

Post by Quark » Sun Oct 30, 2016 6:34 am

MN Finance wrote:Giving investment advice requires licensing. If you are unlicensed and give advice you are practicing without a license, though the state or feds are unlikely to care that a layperson gives advice. They would be more concerned with an unlicensed professional giving advice (ex, an insurance agent giving securities advice or a stock broker giving insurance advice.)

A licensed professional could be taken to arbitration for giving bad advice but that bar is significantly high enough that it would be painfully obvious to the posters here it was bad (and 'more bad' than the sins most here think are bad but aren't technicqlly.)

Giving general advice to a wide audience, even to the point of recommending specific investments is not considered giving advice in this context.
Can you cite a law or rule which supports the idea that giving investment advice in and of itself requires licensing? If you're managing assets or giving advice to clients, of course, but just giving advice (even specific advice to a single person) without a fee?

For example, "An investment advisor is defined by the Investment Advisors Act of 1940, as any person or group that makes investment recommendations or conducts securities analysis in return for a fee, whether through direct management of client assets or via written publications." (emphasis added). http://www.investopedia.com/terms/i/inv ... dvisor.asp

There are many people who give specific advice to specific individuals without licensing. For example, any number of newspaper columnists. I find it hard to believe newspapers would run such columns if there was any meaningful risk of liability.

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